Archive for October, 2007

Gloomy reading

The Financial Times for weekend of 6th and 7th October made gloomy reading for anyone in the property market. With headlines such as “Commercial property slides” and “Barratt drops 4% after downgrade for housebuilders”, one cannot help but look back to previous slumps in the property market – the first fall in 15 years according to the FT.

In a falling market, landlords will look for greater security. Parent company guarantees are already common and whilst many headlines following Mr Justice Etherton’s judgement in the case of Prudential Assurance Co Ltd and others v PRG Powerhouse Ltd and others [2007] EWHC 1002 Ch gave the impression that a tenant company’s voluntary arrangement cannot release a parent company’s guarantee, that is not what the judge said. He held that the guarantees were released. However, the CVA under consideration did unfairly prejudice the interests of the landlords and was therefore not upheld. Others will, no doubt, be more carefully drafted.

The Insolvency Act 1986 and the Enterprise Act 2002 changed the face of insolvency law introducing the voluntary arrangement for both individuals and companies. Administrative receivers will no longer be appointed under debentures created on or after 15th September 2003 and both lenders and landlords may find a very different regime from that which prevailed in previous downturns in the market.

From a tenants’ point of view, they will inevitably seek break clauses in new leases which landlords will try to defeat with the introduction of stiff pre-conditions.

The world has changed since the last slump in the property market. Ask Hatherleigh Training to assist in updating you and your staff on the new regime.